Bottom line:  USDCHF remains bearish against 1.0027 levels as bears regain control dropping below initial support at 0.9868.

Technical Analysis:

USDCHF print 1.0023 last Friday and reversed sharply lower, in line with much awaited bearish reversal. In the process, the immediate support has been taken out at 0.9868, hence we can expect a pullback/counter trend rally before the drop continues further. Until 1.0027 resistance holds, USDCHF remains a classic case of selling on rallies. Overall wave structure still remains fairly unchanged except for the time taken to terminate lower degree wave 2 at 1.0023 levels last week. The drop between 1.0237 through 0.9659 levels was in 5 waves (impulse), labelled as Wave (1). This was followed by a corrective rally A-B-C that terminated at 1.0027, labelled as Wave (2). A classic Elliott Wave 5-3 pattern is followed by another 5 waves movement towards the major trend, which is down in this case. Hence, if the above described wave structure holds true, we can expect another 5 wave drop lower towards 0.9696 and lower; while prices stay below 1.0027. Looking at the short term structure since 1.0027 highs, a lower degree wave 1 and 2 seem to be in place at 0.9840 and 1.0023 respectively. This brings us to a high probable conclusion that a 3^rd of (3) rd wave is underway since 1.0023 highs last week. If this holds true, a sharp drop towards 0.9696 and lower levels should be on cards, going forward. A high probable trade setup from here could be expected on the south side against 1.0027 and projected targets below 0.9696. Watch out for a potential intraday corrective rally towards 0.9950/60 levels, before continuing lower again. These rallies should be considered as opportunities to build short positions or add further.

Prepared by

Harsh Japee, Technical Analyst

USDCHF Chart

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